In its assessment of Malta’s Convergence Programme submitted last December, the European Commission noted that deficit fell below 3% in 2006. The Commission also stated that Malta has progressed towards balance as well as a debt below 60% of Gross Domestic Product in 2009. The Convergence Programme outlines Malta’s progress towards adopting the euro currency by 2008.

The Commission however added that budgetary outcomes after 2007 depend on growth expectations, which are on the optimistic side. In its assessment, the Commission also invited Malta to spell out its budgetary expenditure control strategy and progress further on the road of healthcare reform.

" Malta comes from a long way since its deficit was 10% only four years ago. After the correction in 2006, which we expect to see confirmed soon, the challenge is to continue on a virtuous path and reduce the deficit and the debt to more sustainable levels." said Economic and Monetary Affairs Commissioner Joaqui­n Almunia.

Malta submitted a new update of its convergence programme on the 7th December 2006, covering the period between 2006 and 2009. The update aims at correcting the excessive deficit by 2006 and further improving its public finances thereafter. The Commission reported that structural deficit is expected to improve gradually over the programme period, and the pace of adjustment is broadly in line with the Pact after the correction of the excessive deficit.

“There are, however, risks of worse-than-targeted budgetary outcomes after 2007 due to the markedly favourable macroeconomic scenario underlying the update's projections. Malta appears to be at medium risk as regards the long-term sustainability of public finances,” continued the European Commission in a statement issued on Wednesday.

The Commission noted that overall, the programme seems consistent with a correction of the excessive deficit by 2006 and the debt ratio seems to be diminishing at a satisfactory pace towards 60% of GDP. However it added that maintaining a budgetary position that is robust to offset possible growth reversals is important especially in light of the recent build-up of external imbalances.

In turn, Malta was recommended to  Council pursue adequate progress towards the medium term objective and ensure that the debt-to-GDP ratio is reduced accordingly, while spelling out the budgetary strategy, especially on the expenditure side, with a longer time perspective. Additionally, in view of the level of debt and the projected increase in age-related expenditure, Malta was called on to improve the long-term sustainability of public finances by achieving the medium term objective and making further progress in the design and implementation of the healthcare reform.